The payoff for the executive blamed for losing HBOS billions was under investigation yesterday after lawyers raised questions about his contractual entitlements, The Times has learnt.

As a top City legal firm was appointed to examine the “obscene” pension award to Sir Fred Goodwin, it emerged that the Treasury had already asked for assurances about the package that Peter Cummings received when he left his post as head of corporate lending at HBOS.

John Kingman, chief executive of UK Financial Investments (UKFI), which looks after the taxpayers’ interest in the part-nationalised banks, wrote to Sir Victor Blank, chairman of Lloyds Banking Group, to ask whether Mr Cummings had received the minimum legal payment.

It is understood that UKFI’s lawyers had drawn enough concerns to Mr Kingman’s attention to make him question whether the £660,000 award was too high. The inquiry is also looking into Mr Cummings’s £5.9 million pension pot, The Times was told.

The second inquiry emerged as Gordon Brown threw a protective shield around Lord Myners, the City Minister who faced calls to resign for failing to block Sir Fred’s £17 million pension deal. A senior government source said, “Gordon is not about to hand Sir Fred the scalp of Paul Myners”, amid persistent Whitehall claims that the RBS board had not been told that the award to Sir Fred, which gives him £693,000 a year, was discretionary. If that turned out to be the case the chances of a successful legal attempt to claw back some of Sir Fred’s award might be enhanced.

But ministers and officials admitted that Lord Myners had probably not asked enough questions when allegedly told that the award was unchallengeable. There was sympathy for him from advisers who said that, when the deal was approved, the Government’s concern had been to save the banking system rather than question pension arrangements.

Downing Street insiders said that Lord Myners was appointed for his financial expertise and that his lack of political acumen was probably the reason that he did not “see the warning lights glaring” when the size of the pension pot was mentioned. Sources said that Alistair Darling, the Chancellor, did not become aware of the pension deal until much later but that he did not blame Lord Myners for that. “His job was to help to save that bank and he did it.”

Lloyds, which took over HBOS as part of the rescue deal, said that it was looking into Mr Cummings’s payoff, although it has always refused to confirm the size of it. UKFI had asked it to look into payoffs to former HBOS directors, including Mr Cummings — who lost the bank £6.9 billion last year. “Lloyds agreed with UKFI last week that it would assure itself that all payouts were no more than was legally necessary,” a UKFI spokesman said. The Times was told that the award to Mr Cummings raised particular concern, and Sir Victor said: “We will take a look at it if we think there’s a reason to do so.”

Mr Cummings, who courted prominent entrepreneurs, was known for doing deals on no more than a handshake, but his risky bets on the property market nearly bankrupted HBOS.

Lloyds shareholders — who yesterday learnt that the bank’s profits plummeted by 80 per cent and that HBOS had lost £10.8 billion last year — have been highly critical of Mr Cummings and of the bank’s relationship with Andy Hornby, the former HBOS chief executive. Mr Hornby turned down a payoff, but Lloyds still employs him as a consultant on a salary of £60,000 a month. Mr Hornby has a pension pot of £2.4 million from the bank, and Mr Cummings has a pot of £5.97 million.

Sir Victor and Lloyds’ chief executive, Eric Daniels, tried to distance themselves from the HBOS payoff, saying that the deals were struck by the HBOS Remuneration Committee before the merger and that everyone on that committee had left the bank.Sir Victor said: “Our understanding is that they were paid in line with their legal entitlements.” The results of the review are expected in days.

It was reported last night that Mr Daniels could receive up to £8.27 million in perks and bonuses on top of his £1 million salary this year thanks to a pay deal negotiated last month. His package is expected to be announced in the bank’s annual report.

Mr Brown repeated his threat of legal action against Sir Fred. He said that he shared public anger at the size of the pension. “When banks fail . . . the people who make the mistakes cannot and should not run off with entitlements and with additional discretionary payments . . . This is unjustifiable, unacceptable and we are going to clean up the banks so that this doesn’t happen again.”

The Tories said that Mr Brown’s anger was “synthetic”, as ministers knew about the pension and should have stopped it. George Osborne, the Shadow Chancellor, said that it was pathetic for ministers to protest about the pension deal now and, although the public had a right to be angry about it, they should also be angry about Mr Brown and Lord Myners.

“We should be angry that this row has further sapped confidence in the Government’s ability to handle the banking crisis which is at the heart of this recession,” he said.

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